Novartis AG SWOT Analysis / Matrix

Business Essays, Term Papers & Research Papers

SWOT analysis is a vital strategic planning tool that can be used by Novartis AG managers to do a situational analysis of the firm . It is an important technique to evalauate the present Strengths (S), Weakness (W), Opportunities (O) & Threats (T) Novartis AG is facing in its current business environment.

The Novartis AG is one of the leading organizatations in its industry. Novartis AG maintains its dominant position in market by critically analyzing and reviewing the SWOT analysis. SWOT analysis a highly interactive process and requires effective coordination among various departments within the organization such as – marketing, finance, operations, management information systems and strategic planning.

The SWOT Analysis framework facilitates an organization to identify the internal strategic factors such as -strengths and weaknesses, & external strategic factors such as - opportunities and threats. It leads to a 2X2 matrix – also called SWOT Matrix.

The Strengths-Weaknesses-Opportunities-Threats (SWOT) Analysis / Matrix helps the managers of the Novartis AG to develop four types of strategies:

SO (strengths-opportunities) Strategies

WO (weaknesses-opportunities) Strategies

ST (strengths-threats) Strategies

WT (weaknesses-threats) Strategies

SWOT Matrix Strategies Objective

The primary purpose of SWOT matrix is to identify the strategies that a firm can utilize to exploit external opportunities, counter threats, and build on & protect Novartis AG strengths, and eradicate its weaknesses.

Step by Step Guide to Novartis AG SWOT Analysis

Strengths of Novartis AG – Internal Strategic Factors

As one of the leading companies in its industry, Novartis AG has numerous strengths that enable it to thrive in the market place. These strengths not only help it to protect the market share in existing markets but also help in penetrating new markets. Based on Fern Fort University extensive research – some of the strengths of Novartis AG are –

Automation of activities brought consistency of quality to Novartis AG products and has enabled the company to scale up and scale down based on the demand conditions in the market.

High level of customer satisfaction – the company with its dedicated customer relationship management department has able to achieve a high level of customer satisfaction among present customers and good brand equity among the potential customers.

Good Returns on Capital Expenditure – Novartis AG is relatively successful at execution of new projects and generated good returns on capital expenditure by building new revenue streams.

Superb Performance in New Markets – Novartis AG has built expertise at entering new markets and making success of them. The expansion has helped the organization to build new revenue stream and diversify the economic cycle risk in the markets it operates in.

Highly successful at Go To Market strategies for its products.

Strong Free Cash Flow – Novartis AG has strong free cash flows that provide resources in the hand of the company to expand into new projects.

Strong dealer community – It has built a culture among distributor & dealers where the dealers not only promote company’s products but also invest in training the sales team to explain to the customer how he/she can extract the maximum benefits out of the products.

Highly skilled workforce through successful training and learning programs. Novartis AG is investing huge resources in training and development of its employees resulting in a workforce that is not only highly skilled but also motivated to achieve more.

Weakness of Novartis AG – Internal Strategic Factors

Weakness are the areas where Novartis AG can improve upon. Strategy is about making choices and weakness are the areas where a company can improve using SWOT analysis and build on its competitive advantage and strategic positioning.

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Days inventory is high compare to the competitors – making the company raise more capital to invest in the channel. This can impact the long term growth of Novartis AG

Limited success outside core business – Even though Novartis AG is one of the leading organizations in its industry it has faced challenges in moving to other product segments with its present culture.

Investment in Research and Development is below the fastest growing players in the industry. Even though Novartis AG is spending above the industry average on Research and Development, it has not been able to compete with the leading players in the industry in terms of innovation. It has come across as a mature firm looking forward to bring out products based on tested features in the market.

The company has not being able to tackle the challenges present by the new entrants in the segment and has lost small market share in the niche categories. Novartis AG has to build internal feedback mechanism directly from sales team on ground to counter these challenges.

Need more investment in new technologies. Given the scale of expansion and different geographies the company is planning to expand into, Novartis AG needs to put more money in technology to integrate the processes across the board. Right now the investment in technologies is not at par with the vision of the company.

High attrition rate in work force – compare to other organizations in the industry Novartis AG has a higher attrition rate and have to spend a lot more compare to its competitors on training and development of its employees.

The profitability ratio and Net Contribution % of Novartis AG are below the industry average.

Opportunities for Novartis AG – External Strategic Factors

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New trends in the consumer behavior can open up new market for the Novartis AG . It provides a great opportunity for the organization to build new revenue streams and diversify into new product categories too.

Decreasing cost of transportation because of lower shipping prices can also bring down the cost of Novartis AG’s products thus providing an opportunity to the company - either to boost its profitability or pass on the benefits to the customers to gain market share.

Government green drive also opens an opportunity for procurement of Novartis AG products by the state as well as federal government contractors.

Organization’s core competencies can be a success in similar other products field. A comparative example could be - GE healthcare research helped it in developing better Oil drilling machines.

New customers from online channel – Over the past few years the company has invested vast sum of money into the online platform. This investment has opened new sales channel for Novartis AG. In the next few years the company can leverage this opportunity by knowing its customer better and serving their needs using big data analytics.

The new taxation policy can significantly impact the way of doing business and can open new opportunity for established players such as Novartis AG to increase its profitability.

New environmental policies – The new opportunities will create a level playing field for all the players in the industry. It represent a great opportunity for Novartis AG to drive home its advantage in new technology and gain market share in the new product category.

Opening up of new markets because of government agreement – the adoption of new technology standard and government free trade agreement has provided Novartis AG an opportunity to enter a new emerging market.

Threats Novartis AG Facing - External Strategic Factors

As the company is operating in numerous countries it is exposed to currency fluctuations especially given the volatile political climate in number of markets across the world.

Increasing trend toward isolationism in the American economy can lead to similar reaction from other government thus negatively impacting the international sales.

Shortage of skilled workforce in certain global market represents a threat to steady growth of profits for Novartis AG in those markets.

Intense competition – Stable profitability has increased the number of players in the industry over last two years which has put downward pressure on not only profitability but also on overall sales.

The company can face lawsuits in various markets given - different laws and continuous fluctuations regarding product standards in those markets.

Rising pay level especially movements such as $15 an hour and increasing prices in the China can lead to serious pressure on profitability of Novartis AG

Imitation of the counterfeit and low quality product is also a threat to Novartis AG’s product especially in the emerging markets and low income markets.

Rising raw material can pose a threat to the Novartis AG profitability.

Limitations of SWOT Analysis for Novartis AG

Although the SWOT analysis is widely used as a strategic planning tool, the analysis does have its share of limitations.

Certain capabilities or factors of an organization can be both a strength and weakness at the same time. This is one of the
major limitations of SWOT analysis
. For example changing environmental regulations can be both a threat to company it can also be an opportunity in a sense that it will enable the company to be on a level playing field or at advantage to competitors if it able to develop the products faster than the competitors.

SWOT does not show how to achieve a competitive advantage, so it must not be an end in itself.

The matrix is only a starting point for a discussion on how proposed strategies could be implemented. It provided an evaluation window but not an implementation plan based on strategic competitiveness of Novartis AG

SWOT is a static assessment - analysis of status quo with few prospective changes. As circumstances, capabilities, threats, and strategies change, the dynamics of a competitive environment may not be revealed in a single matrix.

SWOT analysis may lead the firm to overemphasize a single internal or external factor in formulating strategies. There are interrelationships among the key internal and external factors that SWOT does not reveal that may be important in devising strategies.

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Weighted SWOT Analysis of Novartis AG

In light of the above mentioned limitations of the SWOT analysis / matrix, corporate managers decided to provide weightage to each internal strength and weakness of the firm. Organizations also assess the likelihood of events taking place in the coming future and how strong their impact could be on company's performance.

This method is called Weighted SWOT analysis. It is better than doing simplistic SWOT analysis because with Weighted SWOT Analysis Novartis AG managers can focus on the most critical factors and discount the non-important one. It also solves the long list problem where organizations ends up making a long list but none of the factors deemed too critical.

Limitation of Weighted SWOT analysis of Novartis AG

This approach also suffers from one major drawback - it focus on individual importance of factor rather than how they are collectively important and impact the business holistically.